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This weekend finds NYC in between Internet Week (which I largely missed because of
my London trip) and Disrupt NYC (which I will be at on and off
this coming week). So the development of NYC as a startup hub is
very much on my mind. And so I thought I'd post about the
development of startup hubs.

This theory, which I like the call The Darwinian Evolution of
Startup Hubs, is not new and I certainly didn't come up with it.
But I think it is important for everyone to understand and so I'm
going to blog about it.

If you study Silicon Valley, what you see is something that looks
like a forest where trees grow tall, produce seeds that drop and
start new trees, and eventually the older trees mature and stop
growing or worse, die of disease and rot, but the new trees grow
up even taller and stronger.

If I left out important foundational companies of this mental
model, please forgive me. That was not meant to be a
comprehensive history. It was meant to illustrate how this
evolutionary scenario plays out over time.

If you drill down a bit deeper, you see that the founders,
investors and early employees generate a tremendous amount of
wealth from these big successes. The later employees don't make
as much wealth but they do learn a ton and make enough money that
they don't need to work for someone else and so they strike out
on their own and are often funded by the folks who made the big
money in the prior startup. That's how the seed drops from the
tree and starts a new tree growing. This continues on and on and
on.

If you look at that history of silicon valley, you see that in
the forty year history (since Intel's formation), there have been
close to ten cycles of maturation and new company formation, and
those cycles are getting shorter and the number of important
foundational companies that are formed each cycle are increasing.

That makes total sense since this darwinian evolutionary model is
non linear. One company begets two and those two companies beget
four, and so on and so forth. Of course there are exogenous
factors that also play out, like technology changes, financial
market cycles, and the availability and cost of talent, and they
impact how fast the startup hub economy expands.

This darwinian evolutionary model of startup hub development is
not limited to silicon valley. We have seen it play out in other
places, most notably Boston, and increasingly in NYC. It is also
playing out in markets like Boulder Colorado and Austin Texas and
many other parts of the US and many parts of the world.

When I look at a startup hub, I like to figure out what the
"Fairchild Semiconductor" of that market was and when it got
started. That tells me how far along the development cycle that
startup hub is. In NYC, that was Doubleclick which was founded in
1996, the same year as my first venture capital firm, Flatiron
Partners, which was founded on two premises, that the Internet
would be big and that NYC would be an important locus of Internet
innovation. We did not invest in Doubleclick (sadly) but we did
invest in a lot of interesting Internet companies in NYC in the
late 90s.

So NYC's startub ecosystem is 16 years old now. And we are two
cycles in. The companies that are getting started and funded
right now in NYC are akin to the Apple/Oracle stage of silicon
valley. If you want to push, you could suggest that we are three
cycles in now and the companies that are getting funded right now
are akin to the Sun/Silicon Graphics/Cisco era. That might be
right.

But in any case, NYC's tech sector is not anywhere close in terms
of fertility to silicon valley. It will be there in another 25 to
30 years. And silicon valley will be even further along.

Unless, of course, something else happens.

The technological revolution that preceded the digital revolution
was autos and airplanes. They were invented in the late 19th and
early 20th centuries and the first commercial startups emerged in
the first decade of the 20th century. The auto/airplane
revolution played out until the 1960s/1970s. That suggests that a
technology revolution last around 75 years.

The transistor was invented in the late 1940s and by 1958, we had
commercial startups working on the technology. So if this
revolution is anything like the last, the next big thing will be
invented any day now and within a decade or two we will be on to
the next technology revolution.

And in that case, all bets are off. Silicon Valley could become
the next Detroit and who knows what will be the next Silicon
Valley.

But of course, all of this is conjecture. History doesn't repeat
itself. But it does rhyme. That comes from Samuel Clemens (aka
Mark Twain). One of my favorite people ever.